It’s possible to protect national security without jeopardizing the economy

The latest fashion sweeping our nation’s capital this summer has been to cloak protectionist trade policies under the thinly veiled guise of national security. Thankfully, Congress has bucked that trend, passing much-needed legislation intended to protect America’s defense capabilities while also maintaining our nation’s long-standing commitment to free enterprise.

The Senate recently passed a bill designed to modernize the Committee on Foreign Investment in the United States (CFIUS), a federal inter-agency committee tasked with reviewing cross-border mergers and acquisitions for threats to U.S. national security. It is authorized to block deals where a foreign company might share the sensitive technology, research or data of the U.S. company it acquires with one of America’s adversaries.

CFIUS has been around for decades, but the last time it was modernized, Miley Cyrus was touring as Hannah Montana. At the time of those reforms, CFIUS conducted a half-dozen investigations annually. According to the latest unclassified report from CFIUS, it launched 66 investigations in 2015. Not only has the volume of investigations grown exponentially, so has the complexity of the transactions and the technologies of interest.

The current CFIUS process is stretched to its limits, with professionals working overtime to review transactions. Nonetheless, reviews are taking longer to complete. In the case of cross-border deal-making, time is money and chronically prolonged reviews can discourage investment.

While CFIUS is focused on the sliver of foreign direct investment that flows into industries related to national security, it is important not to lose sight of the incredible benefits that international companies provide the U.S. economy and workforce.

After all, international companies operating in the United States are a good measure of U.S. competitiveness. There are 6.8 million U.S. workers directly employed by international companies, earning an average of $79,000 annually in wages and benefits, 24 percent more than the average U.S. job. In fact, 54 percent of the U.S. manufacturing jobs created in the past five years came from international companies.

Just last week, the U.S. Commerce Department announced that cumulative international investment in America’s economy has topped $4 trillion – larger than the entire economy of Germany or the United Kingdom.

International companies help diversify America’s economy, making it more resilient to downturns. They also open new markets, shipping nearly a billion dollars in goods a day to customers around the world. When international companies invest here, it means their home countries now have a stake in America’s success.

Aware of those benefits, lawmakers carefully balanced protecting our national security with not unduly harming U.S. economic competitiveness. A thoughtful and bipartisan process on Capitol Hill to modernize CFIUS resulted in the Foreign Investment Risk Review Modernization Act (FIRRMA).

This legislation avoids the pitfalls that would discourage beneficial investment in the United States or impose unnecessary regulatory burdens on industry and the government. The final legislation more closely aligns CFIUS reviews with transactions that could lead to the potential transfer of critical technology. It provides a regular interagency process to identify emerging and foundational technologies of concern that should be subject to export controls and mandates that the public be notified and have a chance to comment on those proposed regulations. It also allows companies to reinvest and grow their operations without triggering additional CFIUS reviews.

Importantly, FIRRMA does not radically change the scope of CFIUS to make it a tool for escalating trade disputes, coercing market reciprocity or imposing bygone industrial policy. It keeps CFIUS squarely focused on protecting U.S. national security from the deceitful efforts of our nation’s adversaries.

When policymakers and the American public have faith in the CFIUS process, international companies have greater confidence in investing in the United States, knowing their deals will not be unduly politicized. That makes FIRRMA very pro-business.

Nancy McLernon is the president and CEO of the Organization for International Investment (www.OFII.org)